What Happens when Your Car Gets Repossessed - How It Affects a Credit Rating

It’s embarrassing. It’s frightening. It’s automobile repossession, and it happens more than most people think it does. But what happens when your car is repossessed? Does it get sent to the auction block right away? The following will answer that question in as thorough a manner as possible.


Phoenix, AZ -- (SBWIRE) -- 12/28/2012 -- Here is what happens when your car gets repossessed. First, the lien holder sends out several warnings that the car will be repossessed if arrangements are not made for payment. If the car’s owner makes said arrangements, the repossession generally does not go forward. However, if the owner ignores the warnings, the financer contracts an automobile repossession agent to take the car back. If the repo agent does not have a key to the vehicle, he can put a boot on the car or tow it in order to retrieve it. After the truck or car has been taken, the repossession agent lets local authorities know that it has been repossessed so that if the owner reports it stolen, the police can say that it has not been. The vehicle is then taken to the lender’s office or that of the repo agent and all personal effects that belong to the owner are removed and kept in storage until he or she comes to get them. After that, the auto is sent to auction. If the car sells for less than what is owed on it, the owner is responsible to pay the difference.

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That is the process of what happens when your car is repossessed, but how does this action affect one’s credit rating? While there is no specific number of percentage points one’s credit score will drop after repossession, know that it will decrease a great deal. There are two kinds of repossession: voluntary and involuntary. The first occurs when an owner voluntarily gives the vehicle back to the lien holder after cleaning out all of his personal effects. The second happens when a lien holder hires a repossession agent to go get the car. Either one of these can damage a credit score considerably, and a lower score leads to denial of other loans and new forms of credit. That can make life a bit more difficult.

To save oneself the trouble of finding out how car repossession affects credit score, prevent the repossession from happening. Contact the lender the minute the loan payment cannot be met. Make some sort of mutually acceptable agreement to get the loan current. Look into refinancing the loan, if necessary, or get a modification to it.

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